Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No
¨

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes x No
¨

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, non-accelerated filer or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

x

Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No
x

There were 110,327,707 shares of the Registrant’s
Common Stock issued and outstanding on May 7, 2015.

Weighted average shares used in computing basic net loss per common share

110,170

88,929

Weighted average shares used in computing diluted net loss per common share

110,305

88,929

See Notes to Condensed Financial Statements

4

TITAN PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

Three months Ended March 31,

2015

2014

Cash flows from operating activities:

Net loss

$

(4,897

)

$

(1,804

)

Adjustments to reconcile loss to net cash used in operating activities:

Depreciation and amortization

89

88

Non-cash loss on changes in fair value of warrants

3,279

864

Stock-based compensation

491

326

Changes in operating assets and liabilities:

Receivables

485

738

Prepaid expenses and other assets

(151

)

(83

)

Accounts payable and other accrued liabilities

(411

)

(775

)

Deferred contract revenue

(911

)

(911

)

Net cash used in operating activities

(2,026

)

(1,557

)

Cash flows from investing activities:

Purchases of furniture and equipment

(7

)

(2

)

Net cash used in investing activities

(7

)

(2

)

Cash flows from financing activities:

Issuance of common stock due to the vesting of restricted shares

(14

)

—

Net cash used by financing activities

(14

)

—

Net decrease in cash and cash equivalents

(2,047

)

(1,559

)

Cash at beginning of period

15,470

11,798

Cash at end of period

$

13,423

$

10,239

See Notes to Condensed Financial Statements

5

TITAN PHARMACEUTICALS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(unaudited)

1. Organization and Summary of Significant Accounting Policies

The Company

We are a specialty pharmaceutical company developing
proprietary therapeutics for the treatment of serious medical disorders. Our product development programs utilize our proprietary
long-term drug delivery platform, ProNeura®, and focus primarily on innovative treatments for select chronic diseases for which
steady state delivery of a drug provides an efficacy and/or safety benefit. We are directly developing our product candidates and
also utilize corporate, academic and government partnerships as appropriate. We operate in only one business segment, the development
of pharmaceutical products.

Basis of Presentation

The accompanying unaudited condensed financial
statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim
financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by U.S. GAAP for complete financial statement presentation. In the opinion
of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 2015 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2015, or any future interim periods.

The balance sheet at December 31, 2014
has been derived from the audited financial statements at that date, but does not include all of the information and footnotes
required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements should be read in conjunction
with the audited financial statements and footnotes thereto included in the Titan Pharmaceuticals, Inc. Annual Report on Form 10-K
for the year ended December 31, 2014, as filed with the Securities and Exchange Commission (“SEC”).

The preparation of financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates.

The accompanying financial statements have
been prepared assuming we will continue as a going concern. At March 31, 2015, we had cash of approximately $13.4 million, which
we believe is sufficient to fund our planned operations into the fourth quarter of 2016.

Although Braeburn has commenced the clinical
study and is proceeding with plans for completing the clinical study expeditiously, under our December 2012 license agreement with
Braeburn, as amended (the “Agreement”), Braeburn currently has the technical right to terminate the Agreement. If Braeburn
were to exercise its right to terminate the Agreement, we would not have sufficient funds available to us to complete the FDA regulatory
process and, in the event of ultimate approval, commercialize Probuphine without raising additional capital. If we are unable to
complete a debt or equity offering, or otherwise obtain sufficient financing in such event, our business and prospects would be
materially adversely impacted. Furthermore, in order to advance our current ProNeura development program for Parkinson’s
disease to later stage clinical studies, we will require additional funds, either through payments from Braeburn under the Agreement
in the event the Probuphine NDA is ultimately approved or through other financing arrangements, to complete the clinical studies
and regulatory approval process necessary to commercialize any additional products we might develop.

6

Revenue Recognition

We generate revenue principally from collaborative
research and development arrangements, technology licenses, and government grants. Consideration received for revenue arrangements
with multiple components is allocated among the separate units of accounting based on their respective selling prices. The selling
price for each unit is based on vendor-specific objective evidence, or VSOE, if available, third party evidence if VSOE is not
available, or estimated selling price if neither VSOE nor third party evidence is available. The applicable revenue recognition
criteria are then applied to each of the units.

Revenue is recognized when the four basic criteria
of revenue recognition are met: (1) a contractual agreement exists; (2) transfer of technology has been completed or
services have been rendered; (3) the fee is fixed or determinable; and (4) collectibility is reasonably assured. For
each source of revenue, we comply with the above revenue recognition criteria in the following manner:

•

Technology license agreements typically consist of non-refundable upfront license fees, annual minimum access fees or royalty payments. Non-refundable upfront license fees and annual minimum payments received with separable stand-alone values are recognized when the technology is transferred or accessed, provided that the technology transferred or accessed is not dependent on the outcome of our continuing research and development efforts.

•

Royalties earned are based on third-party sales of licensed products and are recorded in accordance with contract terms when third-party results are reliably measurable and collectibility is reasonably assured. We no longer recognize royalty income related to the Fanapt royalty payments received from Vanda Pharmaceuticals, Inc. (“Vanda”). See Note 6 “Commitments and Contingencies – Royalty Payments.”

•

Government grants, which support our research efforts in specific
projects, generally provide for reimbursement of approved costs as defined in the notices of grants. Grant revenue is recognized
when associated project costs are incurred.

•

Collaborative arrangements typically consist of non-refundable and/or exclusive technology access fees, cost reimbursements for specific research and development spending, and various milestone and future product royalty payments. If the delivered technology does not have stand-alone value, the amount of revenue allocable to the delivered technology is deferred. Non-refundable upfront fees with stand-alone value that are not dependent on future performance under these agreements are recognized as revenue when received, and are deferred if we have continuing performance obligations and have no evidence of fair value of those obligations. Cost reimbursements for research and development spending are recognized when the related costs are incurred and when collections are reasonably expected. Payments received related to substantive, performance-based “at-risk” milestones are recognized as revenue upon achievement of the clinical success or regulatory event specified in the underlying contracts, which represent the culmination of the earnings process. Amounts received in advance are recorded as deferred revenue until the technology is transferred, costs are incurred, or a milestone is reached.

Research and Development Costs and Related Accrual

Research and development expenses include internal
and external costs. Internal costs include salaries and employment related expenses, facility costs, administrative expenses and
allocations of corporate costs. External expenses consist of costs associated with outsourced clinical research organization (“CRO”)
activities, sponsored research studies, product registration, patent application and prosecution, and investigator sponsored trials.
We also record accruals for estimated ongoing clinical trial costs. Clinical trial costs represent costs incurred by CROs and clinical
sites. These costs are recorded as a component of research and development expenses. Under our agreements, progress payments are
typically made to investigators, clinical sites and CROs. We analyze the progress of the clinical trials, including levels of patient
enrollment, invoices received and contracted costs when evaluating the adequacy of accrued liabilities. Significant judgments and
estimates must be made and used in determining the accrued balance in any accounting period. Actual results could differ from those
estimates under different assumptions. Revisions are charged to expense in the period in which the facts that give rise to the
revision become known.

7

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition
guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred
to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.
ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required
within the revenue recognition process than are required under existing U.S. GAAP.

The standard is effective for annual periods
beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective
approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients,
or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption
(which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09
on our financial statements and have not yet determined the method by which we will adopt the standard.

In June 2014, the FASB issued ASU No. 2014-12,
Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the
Requisite Service Period (“ASU 2014-12”). The standard provides guidance that a performance target that affects
vesting of a share-based payment and that could be achieved after the requisite service condition is a performance condition. As
a result, the target is not reflected in the estimation of the award’s grant date fair value. Compensation cost for such
award would be recognized over the required service period, if it is probable that the performance condition will be achieved.
ASU 2014-12 is effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The guidance
should be applied on a prospective basis to awards that are granted or modified on or after the effective date. Companies also
have the option to apply the amendments on a modified retrospective basis for performance targets outstanding on or after the beginning
of the first annual period presented as of the adoption date. We are currently evaluating the impact of our pending adoption of
ASU 2014-12 on our financial statements and the method by which we will adopt the standard.

Subsequent Events

We have evaluated events that have occurred
after March 31, 2015 and through the date that the financial statements are issued.

Fair Value Measurements

We measure the fair value of financial assets
and liabilities based on authoritative guidance which defines fair value, establishes a framework consisting of three levels for
measuring fair value, and expands disclosures about fair value measurements. Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that
may be used to measure fair value:

Financial instruments, including receivables,
accounts payable and accrued liabilities are carried at cost, which we believe approximates fair value due to the short-term nature
of these instruments. Our warrant liabilities are classified within level 3 of the fair value hierarchy because the value is calculated
using significant judgment based on our own assumptions in the valuation of these liabilities.

As a result of the fair value adjustment
of the warrant liabilities, we recorded a non-cash loss on an increase in the fair value of $3.3 million and $0.9 million for the
three months ended March 31, 2015 and 2014, respectively, in our Condensed Statements of Operations and Comprehensive Income (Loss).
See Note 7, “Warrant Liability” for further discussion on the calculation of the fair value of the warrant liability.

(in thousands)

Warrant liability

Total warrant liability at December 31, 2014

$

5,578

Adjustment to record warrants at fair value

3,279

Total warrant liability at March 31, 2015

$

8,857

2. Stock Plans

The following table summarizes the stock-based
compensation expense recorded for awards under the stock option plans for the three month periods ended March 31, 2015 and 2014:

Three Months Ended March 31,

(in thousands, except per share amounts)

2015

2014

Research and development

$

203

$

145

General and administrative

288

181

Total stock-based compensation expenses

$

491

$

326

No tax benefit was recognized related to stock-based
compensation expense since we have incurred operating losses and we have established a full valuation allowance to offset all the
potential tax benefits associated with our deferred tax assets.

We use the Black-Scholes-Merton option-pricing
model with the following assumptions to estimate the stock-based compensation expense for the three month period ended March 31,
2015 and 2014:

Three Months Ended March 31,

2015

2014

Weighted-average risk-free interest rate

1.8

%

2.0

%

Expected dividend payments

—

—

Expected holding period (years)1

6.4

6.5

Weighted-average volatility factor2

1.61

1.66

Estimated forfeiture rates for options granted3

30

%

31

%

(1)

Expected holding period is based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and the expectations of future employee behavior.

(2)

Weighted average volatility is based on the historical volatility of our common stock.

(3)

Estimated forfeiture rates are based on historical data.

Options to purchase 1,374,000 and 275,000 common
shares were granted during the three month periods ended March 31, 2015 and 2014, respectively.

9

The following table summarizes option activity
for the three month period ended March 31, 2015:

(in thousands, except per share amounts)

Options

Weighted Average Exercise Price

Weighted Average Remaining Option Term

Aggregate Intrinsic Value

Outstanding at January 1, 2015

6,620

$

1.23

5.14

$

1

Granted

1,374

0.60

Exercised

—

—

Expired or cancelled

(70

)

2.62

Forfeited

—

—

Outstanding at March 31, 2015

7,924

$

1.11

5.82

$

178

Exercisable at March 31, 2015

7,250

$

1.15

5.43

$

97

No shares of restricted stock were awarded
to employees, directors and consultants during the three month period ended March 31, 2015. 617,000 shares of restricted stock
were awarded to employees, directors and consultants during the three month period ended March 31, 2014.

The following table summarizes restricted stock
activity for the three month period ended March 31, 2015:

(in thousands, except per share amounts)

Restricted
Stock

Weighted Average Exercise Price

Weighted Average Remaining Term

Aggregate Intrinsic Value

Outstanding at January 1, 2015

359

$

—

9.12

$

166

Granted

—

—

Released

(359

)

—

Expired or cancelled

—

—

Forfeited

—

—

Outstanding at March 31, 2015

—

$

—

—

$

—

Exercisable at March 31, 2015

—

$

—

—

$

—

As of March 31, 2015, there was approximately
$254,000 of total unrecognized compensation expense related to non-vested stock options and restricted stock. This expense is expected
to be recognized over a weighted-average period of 0.9 years.

3. Net Loss Per Share

Basic net loss per share excludes the effect
of dilution and is computed by dividing net loss by the weighted-average number of shares outstanding for the period. Diluted net
loss per share reflects the potential dilution that could occur if securities or other contracts to issue shares were exercised
into shares. In calculating diluted net loss per share, the numerator is adjusted for the change in the fair value of the warrant
liability (only if dilutive) and the denominator is increased to include the number of potentially dilutive common shares assumed
to be outstanding during the period using the treasury stock method.

10

The following table sets forth the reconciliation
of the numerator and denominator used in the computation of basic and diluted net loss per common share for the three months ended
March 31, 2015 and 2014:

Three months ended March 31,

(in thousands, except per share amounts)

2015

2014

Numerator:

Net loss used for basic earnings per share

$

(4,897

)

$

(1,804

)

Less change in fair value of warrant liability

—

—

Net loss used for diluted earnings per share

$

(4,897

)

$

(1,804

)

Denominator:

Basic weighted-average outstanding common shares

110,170

88,929

Effect of dilutive potential common shares resulting from options

135

—

Effect of dilutive potential common shares resulting from warrants

—

—

Weighted-average shares outstanding—diluted

110,305

88,929

Net loss per common share:

Basic

$

(0.04

)

$

(0.02

)

Diluted

$

(0.04

)

$

(0.02

)

The table below presents common shares underlying
stock options and warrants that are excluded from the calculation of the weighted average number of common shares outstanding used
for the calculation of diluted net loss per common share. These are excluded from the calculation due to their anti-dilutive effect
for the three months ended March 31, 2015 and 2014:

Three months ended March 31,

(in thousands)

2015

2014

Weighted-average anti-dilutive common shares resulting from options

6,823

6,697

Weighted-average anti-dilutive common shares resulting from warrants

3,280

3,967

10,103

10,664

4. Comprehensive Loss

Comprehensive loss for the periods presented
is comprised solely of our net income and loss. We had no items of other comprehensive income (loss) during the three-month periods
ended March 31, 2015 and 2014. Comprehensive loss for the three-month period ended March 31, 2015 and 2014 was $4.9 million and
$1.8 million, respectively.

5. Braeburn License

In December 2012, we entered into the Agreement
with Braeburn granting Braeburn exclusive commercialization rights to Probuphine in the United States and its territories, including
Puerto Rico, and Canada. As part of the Agreement, we received a non-refundable up-front license fee of $15.75 million (approximately
$15.0 million, net of expenses), and would have received $45.0 million upon approval by the FDA of the NDA as well as up to an
additional $130.0 million upon achievement of specified sales milestones and up to $35.0 million in regulatory milestones for additional
indications, including chronic pain. We would have received tiered royalties on net sales of Probuphine ranging from the mid-teens
to the low twenties.

On May 28, 2013, we entered into an amendment
to the Agreement primarily to modify certain of the termination provisions of the Agreement. The amendment gives Braeburn the right
to terminate the Agreement in the event that (A) after May 28, 2013, based on written or oral communications from or
with the FDA, Braeburn reasonably determines either that the FDA will require significant development to be performed before approval
of the Probuphine™ NDA can be given, such as, but not limited to, one or more additional controlled clinical studies with
a clinical efficacy endpoint, or substantial post-approval commitments that may materially impact the product’s financial
returns or that the FDA will require one or more changes in the proposed label, which change(s) Braeburn reasonably determines
will materially reduce the authorized prescribed patient base, or (B) the NDA has not been approved by the FDA on or before
June 30, 2014. The amendment also provides that we will share in legal and consulting expenses in excess of a specified amount
prior to approval of the NDA.

11

On July 2, 2013, we entered into a second
amendment to the Agreement primarily to establish and provide the parameters for a committee comprised of representatives of Titan
and Braeburn responsible for and with the authority to make all decisions regarding the development and implementation of a strategic
plan to seek approval from the FDA of Probuphine® for subdermal use in the maintenance treatment of adult patients with opioid
dependence, including development of the strategy for all written and oral communications with the FDA. The second amendment also
makes Braeburn the primary contact for FDA communications regarding the Probuphine NDA.

On November 12, 2013, we entered into a stock
purchase agreement pursuant to which Braeburn made a $5 million equity investment in our company and a third amendment to the Agreement
primarily to modify the amount and timing of the approval and sales milestone payments payable under the Agreement. Under the third
amendment, we are entitled to receive a $15 million payment upon FDA approval of the NDA, up to $165 million in sales milestones
and $35 million in regulatory milestones. We are entitled to receive a tiered royalty in the mid-teens to low twenties on
all net sales of Probuphine. In addition, we are entitled to receive a low single digit royalty on sales by Braeburn, if any, of
other continuous delivery treatments for opioid dependence as defined in the third amendment and can elect to receive a low single
digit royalty on sales by Braeburn, if any, of other products in the addiction market in exchange for a similar reduction in our
royalties on Probuphine.

6. Commitments and Contingencies

Royalty Payments

In 1997, we entered into an exclusive license
agreement with Sanofi-Aventis. The agreement gave us a worldwide license to the patent rights and know-how related to the antipsychotic
agent iloperidone, including the ability to develop, use, sublicense, manufacture and sell products and processes claimed in the
patent rights. We are required to make additional benchmark payments as specific milestones are met. Upon commercialization of
the product, the license agreement provides that we will pay royalties based on net sales.

We are party to an agreement with Novartis
Pharma AG (“Novartis”), which, as amended, granted Novartis a worldwide sublicense to iloperidone (Fanapt®) in
exchange for tiered royalties on net sales ranging from 8% to 10% and assumption of responsibility for all clinical development,
registration, manufacturing and marketing of the product. Novartis had the right to commercialize Fanapt in the United States and
Canada. In December 2014, Novartis transferred all rights to commercialize Fanapt in the United States and Canada to Vanda. Our
rights under the agreements have not changed. Pursuant to agreements entered into during 2011, we sold substantially all of our
remaining future royalties on the sales of Fanapt ® to a third party and, accordingly, we no longer recognize royalty
income related to the Fanapt royalty payments received from Vanda, which are transmitted to such third party, unless Fanapt sales
exceed certain thresholds.

7. Warrant Liability

On April 9, 2012, in connection with subscription
agreements with certain institutional investors for the purchase and sale of 6,517,648 shares of our common stock, we issued (i) six-year
warrants (“Series A Warrants”) to purchase 6,517,648 shares of common stock at an exercise price of $1.15 per share
and (ii) six-month warrants (“Series B Warrants”) to purchase 6,517,648 shares of common stock at an exercise
price of $0.85 per share. As a result of our public offering in October 2014 and anti-dilution provisions contained in the outstanding
Series A warrants, the exercise price of such warrants was reduced from $1.15 to $0.89 per share. The Series A Warrants and Series
B Warrants contain a provision where the warrant holder has the option to receive cash, equal to the Black Scholes fair value of
the remaining unexercised portion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually
defined to include various merger, acquisition or stock transfer activities). Due to this provision, ASC 480, Distinguishing
Liabilities from Equity requires that these warrants be classified as liabilities. The fair values of these warrants have been
determined using the Lattice valuation model, and the changes in the fair value are recorded in the Statements of Operations and
Comprehensive Income (Loss). The Lattice model provides for assumptions regarding volatility and risk-free interest rates within
the total period to maturity.

12

During the year ended December 31, 2012,
Series B Warrants to purchase 5,761,765 shares of common stock were exercised at a price of $0.85 per share. The remaining Series
B Warrants to purchase 755,883 shares of common stock expired in October 2012.

During the year ended December 31, 2013,
Series A Warrants to purchase 1,109,010 shares of common stock were exercised resulting in gross proceeds of approximately $1,275,000.
The remaining Series A Warrants to purchase 5,408,638 shares of common stock will expire in April 2018.

The key assumptions used to value the Series A Warrants were as
follows:

Assumption

March 31, 2015

Expected price volatility

90

%

Expected term (in years)

3.0

Risk-free interest rate

0.90

%

Dividend yield

0.00

%

Weighted-average fair value of warrants

$

0.28

In October 2014, we completed an underwritten
public offering (the “2014 Offering”) of 21,000,000 units at an offering price of $0.50 per unit, with each unit consisting
of one share of common stock and 0.75 of a warrant (“Class A Warrant”), each full warrant to purchase one share of
common stock at an exercise price of $0.60 per share. The Class A Warrants will entitle the holders thereof to purchase an aggregate
of 15,750,000 shares of our common stock at an initial exercise price of $0.60 per share of common stock. The Class A Warrants
will be exercisable beginning on the later of (i) one year and one day from the date of issuance and (ii) the date our stockholders
approve either an increase in the number of our authorized shares of common stock or a reverse stock split, in either case in an
amount sufficient to permit the exercise in full of the Class A Warrants and will expire on the fifth anniversary of the date they
first become exercisable.

We agreed to hold a stockholders meeting no
later than March 31, 2015 in order to seek stockholder approval for an amendment to our certificate of incorporation to either
(i) increase the number of shares of common stock we are authorized to issue or (ii) effect a reverse split of the common stock,
in either case in an amount sufficient to permit the exercise in full of the Class A Warrants in accordance with their terms. In
the event that we are unable to effect an increase in our authorized shares of common stock or effect a reverse split of our common
stock prior to October 9, 2015, we will be required to pay liquidated damages in the aggregate amount of $2,500,000. In February
2015, the Class A Warrants were amended to extend the date of the required stockholders’ meeting to August 31, 2015.

We also agreed to issue to the underwriter
warrants to purchase 630,000 shares of common stock (the “Underwriter Warrants”). The Underwriter Warrants have an
exercise price per share of $0.60 and may be exercised on a cashless basis. The Underwriter Warrants are not redeemable by us.
The Underwriter Warrants are substantially the same form as the Class A Warrants included in the units except that they do not
include certain liquidated damages rights contained in the Class A Warrants and will expire on the fifth anniversary of the date
of effectiveness of the registration statement.

The Class A Warrants and Underwriter Warrants
contain a provision where the warrant holder has the option to receive cash, equal to the fair value of the remaining unexercised
portion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually defined to include
various merger, acquisition or stock transfer activities). Due to this provision, ASC 480, Distinguishing Liabilities from Equity
requires that these warrants be classified as liabilities. The fair values of these warrants have been determined using the Binomial
Lattice (“Lattice”) valuation model, and the changes in the fair value are recorded in the Statements of Operations
and Comprehensive Income (Loss). The Lattice model provides for assumptions regarding volatility and risk-free interest rates within
the total period to maturity.

13

The key assumptions used to value the Class A Warrants were as follows:

Assumption

March 31, 2015

Expected price volatility

90

%

Expected term (in years)

5.5

Risk-free interest rate

1.43

%

Dividend yield

0.00

%

Weighted-average fair value of warrants

$

0.45

The key assumptions used to value the Underwriter Warrants were
as follows:

Assumption

March 31, 2015

Expected price volatility

90

%

Expected term (in years)

4.5

Risk-free interest rate

1.25

%

Dividend yield

0.00

%

Weighted-average fair value of warrants

$

0.39

8. Stockholders’ Equity

Common Stock

In October 2014, we completed the 2014
Offering. Net proceeds were approximately $9.6 million after deducting underwriting discounts, commissions and other related
expenses. As a result of the 2014 Offering, and pursuant to the terms of the existing Series A Warrants, the exercise price
of the Series A Warrants (See Note 7, “Warrant Liability” for further discussion) was adjusted to $0.89 per
share.

14

Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations

The following discussion contains “forward-looking
statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Such statements include, but are not limited to, any statements relating to our product development programs and any
other statements that are not historical facts. Such statements involve risks and uncertainties that could negatively affect our
business, operating results, financial condition and stock price. Factors that could cause actual results to differ materially
from management’s current expectations include those risks and uncertainties relating to the regulatory approval process,
the development, testing, production and marketing of our drug candidates, patent and intellectual property matters and strategic
agreements and relationships. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions
to any forward-looking statements contained herein to reflect any change in our expectations or any changes in events, conditions
or circumstances on which any such statement is based, except as required by law.

Probuphine® and ProNeura™ are
trademarks of Titan Pharmaceuticals, Inc. This Form 10-Q also includes trade names and trademarks of companies other
than Titan Pharmaceuticals, Inc.

We are a specialty pharmaceutical company developing
proprietary therapeutics for the treatment of serious medical disorders. Our product development programs utilize our proprietary
long-term drug delivery platform, ProNeura®, and focus primarily on innovative treatments for select chronic diseases for which
steady state delivery of a drug provides an efficacy and/or safety benefit.

Probuphine®, our first product candidate
to utilize ProNeura, is being developed for the long term maintenance treatment of opioid dependence and is designed to maintain
a stable, around the clock blood level of the medicine buprenorphine in patients for six months following a single treatment. We
have licensed the rights to commercialize Probuphine in the U.S. and Canada to Braeburn Pharmaceuticals Sprl (“Braeburn”)
and we have been supporting Braeburn and a team of experts to implement the program developed in cooperation with the FDA to address
the items in the Complete Response Letter (“CRL”) issued in April 2013. This includes conducting a double blind, double
dummy clinical study of a four implant dose of Probuphine in clinically stable patients who are receiving maintenance treatment
with an approved sublingual formulation containing buprenorphine at a daily dose of 8mg or less. This clinical study, which is
being funded and managed by Braeburn, completed patient enrollment in November 2014 and study completion is anticipated by the
end of the second quarter of 2015 followed by resubmission of the NDA later in the year, with a potential PDUFA date for the Probuphine
NDA in the first half of 2016. Pursuant to our license agreement with Braeburn, as amended to date, we are entitled to receive
a $15 million milestone payment upon FDA approval of the Probuphine NDA and royalties on net sales of Probuphine ranging in percentage
from the mid-teens to the low twenties. The Agreement also provides for up to $165 million in sales milestones and $35 million
in regulatory milestones and entitles us to royalty in the low single digit percentage on sales by Braeburn, if any, of certain
other future products in the addiction market.

We believe that our ProNeura technology has
the potential to be used in the treatment of other chronic conditions, such as Parkinson’s disease (PD), where maintaining
stable, around the clock blood levels of a dopamine agonist may benefit the patient and improve medical outcomes. We have commenced
initial work on an implant formulation with ropinirole, a dopamine agonist approved for the treatment of PD. Our goal is to complete
the non-clinical studies required in support of an Investigational New Drug (“IND”) application in the first half of
next year and enable commencement of a ‘proof of concept’ clinical study in the second half of next year following
the potential approval of Probuphine. We are also currently evaluating drugs and disease settings for opportunities to develop
our drug delivery technology for other potential treatment applications in situations where conventional treatment is limited by
variability in blood drug levels and poor patient compliance.

15

We operate in only one business segment, the
development of pharmaceutical products.

Recent Accounting Pronouncements

See Note 1 to the accompanying unaudited condensed
financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for information on recent accounting
pronouncements.

Results of Operations for the three months Ended March 31,
2015 and March 31, 2014

License revenues of approximately $0.9 million
for the three months ended March 31, 2015 and 2014 reflect the amortization of the upfront license fee received from Braeburn in
December 2012.

Research and development expenses for the three
month period ended March 31, 2015 were approximately $1.4 million, compared to approximately $1.0 million for the comparable period
in 2014, an increase of approximately $0.4 million, or 40%. The increase in research and development costs was primarily associated
with increases in external research and development expenses related to the support of our Probuphine and ProNeura product development
programs, employee related expenses and other research and development expenses. During the three month period ended March 31,
2015, external research and development expenses relating to our Probuphine product development program were approximately $0.4
million compared to approximately $0.1 million for the comparable period in 2014. Other research and development expenses include
internal operating costs such as clinical research and development personnel-related expenses, clinical trials related travel expenses,
and allocation of facility and corporate costs. As a result of the risks and uncertainties inherently associated with pharmaceutical
research and development activities described elsewhere in this report, we are unable to estimate the specific timing and future
costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates.

General and administrative expenses for the
three month period ended March 31, 2015 were approximately $1.1 million, compared to approximately $0.9 million for the comparable
period in 2014, an increase of approximately $0.2 million, or 22%. The increase in general and administrative expenses during the
three month period ended March 31, 2015 was primarily related to increases in non-cash stock compensation and employee related
costs of approximately $0.1 million and other expenses of approximately $0.1 million.

Net other expense for the three month period
ended March 31, 2015 was approximately $3.3 million compared to approximately $0.9 million for the comparable period in 2014. Net
other expense consisted primarily of non-cash losses on changes in the fair value of warrants.

Our net loss for the three month period ended
March 31, 2015 was approximately $4.9 million, or approximately $0.04 per share, compared to approximately $1.8 million, or approximately
$0.02 per share, for the comparable period in 2014.

Liquidity and Capital Resources

We have funded our operations since inception
primarily through the sale of our securities and the issuance of debt, as well as with proceeds from warrant and option exercises,
corporate licensing and collaborative agreements, and government-sponsored research grants. At March 31, 2015, we had working capital
of approximately $11.9 million compared to working capital of approximately $12.9 million at December 31, 2014.

16

Our operating activities used
approximately $2.0 million during the three months ended March 31, 2015. This consisted primarily of the net loss for the
period of approximately $4.9 million and $1.0 million related to net changes in other operating assets and liabilities. This
was offset, in part, by non-cash charges of approximately $0.5 million related to stock-based compensation,
approximately $3.3 million related to non-cash losses resulting from changes in the fair value of warrants and approximately
$0.1 million related to depreciation and amortization. Uses of cash in operating activities were primarily to fund product
development programs and administrative expenses.

Our investing activities used approximately
$7,000 during the three months ended March 31, 2015 which was primarily related to purchases of equipment.

Our financing activities used approximately
$14,000 during the three months ended March 31, 2015 which was primarily related to taxes on the vesting of restricted shares.

In October 2014, we completed an underwritten
public offering of 21,000,000 units at an offering price of $0.50 per unit, with each unit consisting of one share of common stock
and 0.75 of a warrant, each full warrant to purchase one share of common stock at an exercise price of $0.60 per share. Net proceeds
were approximately $9.6 million after deducting underwriting discounts, commissions and other related expenses.

At March 31, 2015, we had cash of approximately
$13.4 million, which we believe is sufficient to fund our planned operations into the fourth quarter of 2016.

Although Braeburn has commenced the clinical
study and is proceeding with plans for completing the clinical study expeditiously, under our December 2012 license agreement with
Braeburn, as amended, Braeburn currently has the technical right to terminate the Agreement. If Braeburn were to exercise its right
to terminate the Agreement, we would not have sufficient funds available to us to complete the FDA regulatory process and, in the
event of ultimate approval, commercialize Probuphine without raising additional capital. If we are unable to complete a debt or
equity offering, or otherwise obtain sufficient financing in such event, our business and prospects would be materially adversely
impacted. Furthermore, in order to advance our current ProNeura development program for Parkinson’s disease to later stage
clinical studies, we will require additional funds, either through payments from Braeburn under the Agreement in the event the
Probuphine NDA is ultimately approved or through other financing arrangements, to complete the clinical studies and regulatory
approval process necessary to commercialize any additional products we might develop.

17

Item 3. Quantitative and Qualitative Disclosures About Market
Risk

Our market risk disclosures set forth in our
Annual Report on Form 10-K for the year ended December 31, 2014 have not changed materially.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our President, being our principal executive
and financial officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e)
and 15d-15(e) of the Securities Exchange Act of 1934 as of March 31, 2015, the end of the period covered by this report, and has
concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by
us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our principal executive
and principal financial officer as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) during the three
months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, Titan’s internal
control over financial reporting.

18

PART II

Item 1A. Risk Factors

In addition to the other information set forth
in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2014, which could materially affect our business, financial condition
or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional
risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect
our business, financial condition and/or operating results.

Item 5. Exhibits

No.

Description

3.1

Amended and Restated Certificate of Incorporation of the Registrant, as amended 9

Amendment to Employment Agreement dated June 15, 2010 between the Registrant and Marc Rubin 10

10.13

Amendment to Employment Agreement dated June 15, 2010 between the Registrant and Sunil Bhonsle 10

10.14

Amendment to lease for Registrant’s facilities dated June 15, 2010 11

10.15

Amended and Restated Loan and Security Agreement between the Registrant and Oxford Finance Corporation dated September 27, 2010 12

10.16

Facility Agreement, dated as of March 15, 2011, by and among the Company, Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P., Deerfield Special Situations Fund, L.P., and Deerfield Special Situations Fund International Limited, as amended on February 6, 2013 13, 27

10.17

Security Agreement, dated as of March 15, 2011, by and among the Company, Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P., Deerfield Special Situations Fund, L.P., and Deerfield Special Situations Fund International Limited 13

Paying Agent Agreement, dated November 14, 2011, by and among the Company, Deerfield Management Company, L.P. and U.S. Bank National Association 14

10.23

Agreement, dated as of November 14, 2011, by and among the Company, Deerfield Private Design Fund II, L.P., Deerfield Private Design International II, L.P., Deerfield Special Situations Fund, L.P., and Deerfield Special Situations Fund International Limited 14